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GBP Looks Through Political Tumult

FOREX
  • Following several days of strength amid a risk-off backdrop, the JPY is the poorest performer so far Thursday, undoing yesterday's drop below Y135.00 in USD/JPY. The pair remains below the week's best levels of Y136.36 but a break above here would open again the cycle highs of Y137.00.
  • The more favourable equity price action so far Thursday puts commodity-tied currencies on the front foot, resulting in AUD and NZD rising against most others. AUD/USD, however, remains close to the recent cycle low of $0.6762 and the downtrend drawn off the early June highs keeps the outlook bearish for now.
  • Political tumult continues in the UK, with the PM Johnson set to resign at some point Thursday. The PM is expected to express his intent to carry on as caretaker PM until a new leader is elected before the Conservative party conference in October. GBP is taking the news in its stride, showcasing how well priced the currency was for political uncertainty. GBP trades better against both the USD and EUR ahead of the NY crossover, with attention turning to the leadership race likely across the Summer months.
  • Weekly jobless claims and US trade balance data cross later today as well as the Ivey PMI from Canada. The central bank speakers slate could prove more interesting, with ECB's Lane, Knot, Stournaras and Centeno due as well as BoE's Pill & Mann and Fed's Waller & Bullard.

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